By Miles Raymer
FORTUNE -- The Ann Arbor, Mich.-based independent record label Ghostly International is no stranger to quirky licensing deals. Recently they've collaborated with trendy eyeglasses retailer Warby Parker on a line of limited-edition sunglasses, partnered with Google (GOOG) to provide music for Photowall, a new photo-sharing app that's built into Google's Chromecast TV interface, and signed on to supply the soundtrack for the upcoming PlayStation game Hohokum.
But last year the Ann Arbor District Library came to them with an offer so exotic even they hadn't encountered one like it before -- for a flat fee the library wanted to give away everything Ghostly's ever released, plus the entire catalog of its offshoot label Spectral Sound, in digital form, to AADL card holders for free.
People in the music industry tend to shudder when they see the words "digital" and "free" in close succession, but Ghostly was game, and in late February nearly the entire Ghostly/Spectral discography, nearly 250 albums (minus a few releases that the labels don't entirely own the rights to), went live on the AADL's servers where they can be streamed or downloaded, DRM-free, by any of the approximately 60,000 Ann Arborites who have a library card.
As far as anyone involved is aware, this is the first deal of its kind between a record label and a library (the AADL has previously worked with an online music distributor called Magnatune), and it highlights some of the fundamental ways that some forward-looking labels and libraries have started to adapt to our modern digital climate. Record labels used to be primarily about selling records, and libraries about lending out books and other physical media, but when records and books (or at least their virtual equivalents) can easily be had for free, that model ceases to make sense.
For Ghostly, the AADL deal is just the latest in a long string of experiments in how to sell music in the Internet age. As befits a company that specializes in avant-garde electronic music -- some of its standout acts include experimental electro producer Matthew Dear, synthpop performer Com Truise, and the progressive-rock-influenced group Tycho -- they've embraced emerging technology with an enthusiasm that's kept them ahead of the industry curve.
In 2009 they released Ghostly Discovery, one of the first iPhone apps released by a music label, as well as one of the first to let users stream a label's catalog, and possibly the only one that lets you select music based on a color-coded mood chart. They've also embraced the modern-day concept of selling music via merchandise, including an $125 edition of Matthew Dear's album Black City that comes as a hand-cast abstract sculpture with a code allowing the purchaser to download the music. Embracing technology, according to Ghostly Director of Creative Licensing and Business Affairs Jeremy Peters, "is just who we are. It's where our artists are thinking, at the intersection of technology and creation."
The AADL works along a similarly progressive philosophy. Along with the usual books and DVDs, it also allows card holders to check out music gear, telescopes, and art prints, among other items not usually associated with libraries. It has also started digitizing the archives of defunct local newspaper The Ann Arbor News, recording podcasts devoted to local history, and engaging in other content-creation projects that could have value for Ann Arbor's citizens but don't make enough commercial sense for a for-profit business to undertake. It's one way the library attempts to fulfill what AADL associate director for IT and production, Eli Neiburger, calls an overall mission of "finding unique value to return on the investment that taxpayers have made in us." The other, he says, is to find new ways of doing what libraries have always done at their core, which is to "aggregate the buying power of the community and purchasing shared access to resources."
"When a book was a rare and precious thing," Neiburger says, "[buying a book] was a valuable thing for a library to do, but now books are neither rare nor precious, and in many cases aren't even physical. And it's very clear that the publishing industry isn't interested in libraries having the same sort of use rights in the digital space as we did in the physical space. We have to work with rights holders who are ready to do business in this century instead of trying to hold onto business models from the previous one."
And although Peters says the label was at least partially motivated by a spirit of community service to take the AADL up on its offer, it's still very much a business deal and not just charity. "We aren't expecting rights holders to take a bath on this," Neiburger says. "We want to pay them a fee that they feel is better than they would have done attempting to sell that same content to the same audience that we represent."
Ghostly also receives data on what titles AADL users download to add to its own sales data in order to track the performance of different titles. Additionally, Peters adds, "it's not something that you can necessarily track, like, oh, someone listened to this through the Ann Arbor District Library and then went to the Ghostly store and bought an art print or something, but it goes without saying that those kind of things can happen."
Whether this kind of partnership turns into a workable new business model for content providers remains to be seen, but Neiburger's confident in the concept, and is seeking new partners to try it out with. For those AADL card holders who aren't into avant-garde electronic music, the library will soon start offering DRM-free downloads of children's books and crochet patterns.
Will consumers buy as many e-books when they can borrow them?
By Verne Kopytoff
FORTUNE -- Amazon's dominance in digital books is under perpetual attack by Google (GOOG) and Apple (AAPL). Now you can add another threat to the list: the public library. That's what an analyst from Barclays suggested in a recent research report. Consumers will likely avoid buying e-books if they can borrow them from the library for free.
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